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Should target date funds make explicit allocations to hedge inflation? And if so, at what point in the glidepath does hedging become appropriate? Retirement purchasing power faces decades of inflation risk, yet there has been surprisingly little research into inflation hedging within a lifecycle consumption framework. This paper seeks to quantitatively solve the inflation hedging question, considers the question of hedging and opportunity cost, and offers fresh insights into the relationship between human capital and inflation. Finally, it describes how BlackRock expanded its innovative target date optimization to incorporate inflation.

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All white papers posted were created by the listed authors who are solely responsible for the research, finding and all materials contained therein. Pensions & Investments has not verified or edited the materials (other than for length and style) and does not necessarily agree or disagree with the analysis and positions expressed by the authors. Reference to any company, product or service does not imply recommendation or sponsorship by Pensions & Investments.